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Market Presentation: AUSTRALIA

Market Presentation: AUSTRALIA. Adrian Humphreys COUNTRY MANAGER. August 2010. . > www.lloyds.com/MARKETPRESENTATIONS. 1. What is Lloyd's?. 2. ACCESSING LLOYD ’ S. Content. 3. FOCUS ON DISTRIBUTION. 4. LLOYD ’ S AUSTRALIA. 5. Conclusions. 1. What is LLOYD’S?.

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Market Presentation: AUSTRALIA

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  1. Market Presentation:AUSTRALIA Adrian Humphreys COUNTRY MANAGER August 2010  >www.lloyds.com/MARKETPRESENTATIONS

  2. 1 What is Lloyd's? 2 ACCESSING LLOYD’S Content 3 FOCUS ON DISTRIBUTION 4 LLOYD’S AUSTRALIA 5 Conclusions

  3. 1 What is LLOYD’S? > History> Strong Results > Good Performance > Strength and Stability > Lloyd’s Overview LLOYD’S ENVIRONMENT 3

  4. LLOYD’S Business> History 1 From Coffee House……to Lloyd’s Members 1689 • Ships and goods insured by wealthy individuals acting on a personal basis. • Lloyd’s Coffee House; first recorded February 1689. 1800 – 1850s • Development of syndicates Present Day • iPhone Historical Context 1712 First steam engine 1750s Beginning of the Industrial Revolution 1805 Battle of Trafalgar 1876 Telephone invented

  5. Core strength> Strong Result 1 2009 annual results of a profit before tax of AUD7,736 2006 2009 2005 2007 2008 AUD 32,828m AUD 43,946m Gross written premiums AUD 29,964m AUD 32,732m AUD 35,970m 83.1% 86.1% Combined ratio 111.8% 84.0% 91.3% AUD 3,322m AUD 3,538m Investment return AUD 2,872m AUD 4,014m AUD 1,914m AUD 7,324m AUD7,736m Profit before tax (AUD 206m) AUD 7,692m AUD 3,778m 31.4% 23.9% Return on capital (pre-tax) (0.9%) 29.3% 13.7% Source: Lloyd’s pro forma financial statements, 2009 Interim Results: Rate of Exchange used : 1 GBP = 2 AUD

  6. Core strength> Good Performance 1 Lloyd’s continues to do well against its PEERS. COMBINED RATIO Sources: Sources i) Insurance Information Institute (estimate-2009), ii) Reinsurance Association of America, iii) Company data (8 European companies: 17 Bermudian companies)

  7. Core strength> Good Performance 1 Lloyd’s strengthened position is recognised by the rating agencies S&P rating actions since January 2002 - Lloyd’s IFS rating has been upgraded to A+, despite downgrades in the wider market Upgraded Unchanged Downgraded Negative outlook Sources: Source: AM Best, Fitch and S&P, 2009

  8. Core strength> Good Performance 1 Lloyd’s strengthened position is recognised by the rating agencies Lloyd’s insurer financial strength (“IFS”) is interactively assessed by three leading insurance rating agencies: A (Excellent). Stable Outlook. Affirmed July 2009 A+ (Strong). Stable Outlook. Affirmed 4 August 2009 A+ (Strong). Stable Outlook. Affirmed 30 July 2009 Sources: Source: AM Best, Fitch and S&P, 2009

  9. Core strength> Strength and Stability 1 Syndicate Level Assets 1 st Link AUD 74,800m Several Assets Members ’ Funds at Lloyd ’ s 2 nd Link AUD 26,318m Central Fund AUD 1,996m Corporation Assets AUD 286m Mutual AUD 1,366m 3 rd Link Callable Layer Assets Subordinated Debt / Securities AUD 1916m Chain of Security provides excellent security and Capital Efficiency AUD 1.1bn Source: Society of Lloyd’s financial statements, Annual Report, (March 2010) - Rate of Exchange used : 1 GBP = 2 AUD

  10. ACCESSING LLOYD’S> 2010 Lloyd’s Overview 1 The impact of Large losses, economic downturn and the rating environment poses various challenges and a robust cycle management is necessary • Costliest 1st quarter on record : Lloyd’s continues to be impacted by frequency of large losses this year • CERTAIN CLASSES IMPACTED BY LARGE RISK LOSSES: Energy Market again in “Deepwater” and Aviation is facing another difficult year • ECONOMIC DOWNTURN :still poses significant threat as further claims deterioration is expected in the medium term • Rating environment :continues to be softer than plans anticipated • Cycle management:Robust cycle management is needed as the soft market deepens … Source: Market Review Report, 22nd June 2010, Lloyd’s Analysis Team

  11. 2 ACCESSING LLOYD’S? > Priorities> Coverholders> Initiatives > Brokers > Claims LLOYD’S ENVIRONMENT 11

  12. ACCESSING LLOYD’S> 2010 Lloyd’s Priorities 2 The 2010 Priorities of Lloyd’s have been identified as follows: • Performance management -A resolute focus on underwriting discipline and • risk management • Solvency II -Implementing Solvency II at Lloyd’s in a way that protects, and • where possible, enhances Lloyd’s capital structure and efficiency • The Exchange -Increasing adoption and use of The Exchange • Claims Transformation -Driving a transformation in the way the Lloyd’s • market handles claims to enhance the experience of the customer • Access to business -Improving access to business through streamlining • coverholder management strengthening broker relationships and gaining new • trading rights Source: Market Review Report, 22nd June 2010, Lloyd’s Analysis Team

  13. ACCESSING LLOYD’S> Lloyd’s and Coverholders 2 Lloyd’s holds the coverholder market as an important segment of the overall business • Strategically important distribution channel providing Lloyd’s with local • expertise, access to local markets without costly operations • Sources of product innovation and intelligence • Allows Lloyd’s to access smaller and medium sized risks across different • classes and territories Source: Market Review Report, 22nd June 2010, Lloyd’s Analysis Team

  14. ACCESSING LLOYD’S> Lloyd’s and Coverholders 2 Flexibility, Underwriting Freedom and Extra Capacity were given as the 3 biggest advantages of being a coverholder for Lloyd’s Source: Lloyd’s US MGA Survey

  15. ACCESSING LLOYD’S> Lloyd’s and Coverholders 2 The principal factors that would make MGAs choose an insurer other than Lloyd’s are admitted status, coverage, claims payment and ease of doing business Source: Lloyd’s US MGA Survey

  16. ACCESSING LLOYD’S> Coverholder Initiative 2 “..The development of the coverholder channel, subject to proper and appropriate controls, will be a particular area of focus, with the objective of improving both awareness and the efficiency of this distribution channel” (Lloyd’s Strategy 2010 – 2012) • Technology & Standards: We want to improve operational efficiency of the coverholder distribution model through information standards and taking advantage of e-trading opportunities. • Routes to market: We want to make the route to market for new coverholder business as simple and transparent as possible. • Coverholder experience: We want to make life easier for a coverholder to do business with Lloyd’s. Source: Lloyd’s US MGA Survey

  17. ACCESSING LLOYD’S> Coverholder Initiative 2 Distribution findings – Lloyd’s will remain a broker market • The Corporation is clear that Lloyd’s is and will • remain a broker market • Brokers are changing – they are increasingly placing in most ‘efficient’ markets and have greater reach internationally • Winners will have scale or a strong niche position; Others will be challenged in the near • term by the rate of change in Lloyd’s and wider environments • The Corporation’s focus is on reducing the cost of access to the Lloyd’s market • Existing Lloyd’s brokers are playing a significant role in managing the change successfully Source: xx

  18. ACCESSING LLOYD’S> Brokers 2 The corporation has specific actions for the 2010 to maintain and develop market attractiveness • Support but not cross into the work of the Brokers and Managing Agents • Make placing businesses into the Lloyd’s Market more efficient • Support Small Brokers to Develop and Grow • Undertake Promotional and Educational Activities aimed at existing and potential brokers and coverholders • Provide more detailed market insight for Managing Agents and Brokers Source: Lloyd’s Strategy 2010-2012

  19. australia > Claims services vs Competitors 2 The claims services in Lloyd's compared to our peers is very good Source ‘The Claims Landscape Claims Monitor 2009’, December 2009, Gracechurch Consulting 19

  20. 3 Lloyd’s Australia Ltd > Global Context> Profile> Purpose Lloyd’s Australia 20

  21. LLOYD’S Business>Global Context 3 Australia is Lloyd’s 4th largest market… Growth has been steady over the past 10 years Lloyd’s Top 7 territories Lloyd ’ s premiums (AUD) 14.3bn 56% 44% US 5.61bn 56% 44% UK 1.76bn 87% 13% Canada 1.21bn 76% 24% Australia 0.99bn 13% 87% Bermuda 53% 47% 0.77bn France 53% 47% Germany 0.55bn 2009 Reinsurance 2009 Direct Source: Market Intelligence calculation based on Xchanging figures. Rates of exchange calculated using 2009 average – Rate of Exchange used : 1 USD = 1.1 AUD

  22. LLOYD’S Business>Distribution Overview 3 AUD 1,023m AUD 1,120m AUD 1,221.8m +9.5% +9.1% TOTAL Reinsurance Binding Authorities Direct Lloyd’s premiums continue to grow in Australia, dominated by Binding Authorities and Direct lines. Reinsurance experienced the strongest year-on-year growth of 33% (AUD 74.8m)whilst Binding Authority business increased by 5% (AUD 21.89m) 2007 – 2009 LLOYD’S PREMIUMS:BY DISTRIBUTION 2009 LLOYD’S PREMIUM GROWTH:BY DISTRIBUTION AUD m Gross Signed Premiums in:million AUD Source: Market intelligence based on Xchanging; Country Manager soft intelligence, (March 2010): Rate of Exchange used : 1 USD = 1.1 AUD ! Lloyd’s data is based on Xchanging “REG 258”, (2010); unaudited figures based on country of origin and processing by calendar year; please refer to Appendix for detailed summary of Lloyd’s Data Limitations.

  23. LLOYD’S Business>Business Profile 3 AUD 1,222.1m AUD 1,119.8m AUD1,023m +9.5% +9.1% TOTAL Liability Transit Aviation Marine PA & Health Motor Miscellaneous Property Lloyd’s premiums are dominated by Property and Liability classes. Liability experienced the most significant growthduring 2009 at 12.9% (AUD66m). 2007 – 2009 LLOYD’S PREMIUMS:BY CLASS 2009 LLOYD’S PREMIUM GROWTH:BY CLASS AUD m Gross Signed Premiums in:million AUD Source: Market intelligence based on Xchanging; Country Manager soft intelligence, (March 2010): Rate of Exchange used : 1 USD = 1.1 AUD ! Lloyd’s data is based on Xchanging “REG 258”, (2010); unaudited figures based on country of origin and processing by calendar year; please refer to Appendix for detailed summary of Lloyd’s Data Limitations.

  24. LLOYD’S AUSTRALIA>Purpose 3 Promoteand protectthe Lloyd’s brand in Australia and facilitate thedevelopment of new relationships.Gateway to Australian marketwithbroad expertise availableto assist inbusiness development activities. OFFICE FACILITIES Australian Team: General Rep: Adrian HumphreysCompliance Manager:Peter Fryer General Office: Martina Lee RELATIONSHIP FACILITATOR • Work with local market and provide input into coverholder and broker initiatives • Assistance with local market intelligence; • Networking events/promotional & sponsorship activities; • Facilitate introductions fornew business; • Point of contactand primary Lloyd’s market resource.BRAND PROMOTION & PROTECTION • Promote the profileof the Lloyd’s brand; • Ensure general interests of Lloyd’s are served;Legislative and regulatory compliancewith the law. View from Lloyd’s Australia Office window – May 2010 • Meeting Room available • Teleconferencing system SEE ALSO: www.lloyds.com/AUSTRALIAwww.lloyds.com/MARKETINTELLIGENCE 24

  25. 4 Conclusions 25

  26. Conclusion > Relationships 4 Maintaining relationships through delivery Source: Lloyd’s Strategy 2010-2012

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